California cannabis industry’s real threat still being ignored

AP

In this Dec. 27, 2018, file photo, a grower at Loving Kindness Farms attends to a crop of young marijuana plants in Gardena in Los Angeles County. Legal growers face daunting competition from illegal growers who don't have to pay taxes or get permits.

In this Dec. 27, 2018, file photo, a grower at Loving Kindness Farms attends to a crop of young marijuana plants in Gardena in Los Angeles County. Legal growers face daunting competition from illegal growers who don't have to pay taxes or get permits. (AP)

With state marijuana tax revenue projected to be at least 40 percent lower than what was first expected this fiscal year, Assemblyman Rob Bonta, D-Oakland, has proposed helping the legal marijuana industry in California by temporarily reducing the 15 percent tax on recreational marijuana purchases to 11 percent and temporarily ending the $148 per pound cultivation tax that farmers pay. Both breaks would end in June 2021. The San Diego Union-Tribune Editorial Board welcomes Bonta’s understanding that high taxes can hurt business and wishes he and other lawmakers who are sympathetic to the legal cannabis industry had similar empathy for all the other industries that struggle with the state’s heavy taxes and regulations.

But it’s hard to fathom why Bonta and others don’t grasp that the state’s first order of business in trying to help the legal marijuana industry thrive should be targeting those who grow and sell marijuana illegally. Far from being hurt by the Jan. 1, 2018, onset of legal recreational marijuana use in California, the black market is thriving. According to marijuana industry analyst GreenEdge, legal state sales dropped from $3 billion in 2017 — when medical marijuana was all that could be legally purchased — to $2.5 billion in 2018. That’s stunning.

A September article in Vice magazine laid out why: Legal pot shops have to comply with regulations on potency and safety testing and packaging that illegal dispensaries can ignore, allowing the illegal shops to sell marijuana for 40 percent less than legal stores. A November analysis by the Southern California News Group noted that the 1996 state vote to legalize medicinal marijuana use created an elaborate network of unregulated growers and sellers who are less fearful of the legal consequences if they are caught than in previous eras when marijuana was considered a societal scourge.

The state’s response to this problem has been mild. It issued a warning to the Weedmaps website to stop listing illegal shops along with legal shops last February, which the Irvine-based company ignored. A better idea? Law enforcement should use Weedmaps to locate and shut down these shops.

Tax relief for the cannabis industry may be a good idea. But a 4 percent tax cut won’t come close to ending the huge price advantage owned by illegal shops. Please, Sacramento: Grasp the obvious.